A new survey of small businesses finds that due to budget constraints, many aren't making the grade when it comes to getting a handle on their IT needs.

The IT Effectiveness Index (ITEI) consortium's midyear survey found that 23 percent of the firms it surveyed either flunk or get a "D" grade when it comes to IT effectiveness.

ITEI, which counts partners including Microsoft, Kennesaw State University and Yankee Group, also said nearly two-thirds of companies with 100 or fewer employees are failing to keep up with business needs as a result.

The results to date indicate that many small businesses are falling behind when it comes to implementing accepted best practices for IT operations and management, Steven Kahan, vice president at The Planet, said in a statement.

Besides those companies that rated a failing, or nearly failing, grade, more than a third of small businesses (37 percent) are "barely maintaining their IT operations." Those firms, under the consortium's grading policies, score a "C" grade.

The findings, collected from the 300 firms polled by IETI, aren't necessarily surprising as budgets shrink and companies of all sizes struggle to cope with expenses. Among small businesses, ITEI found that 43.5 percent are postponing, downsizing, or outright canceling IT projects.

Complicating matters: Without much data available on the trend, many small businesses might not even realize they're falling behind.

"Part of the thinking is there just aren't a lot of research tools for small businesses," Carl Meadows, senior manager for product development at The Planet, a hosting outsourcer and another consortium member, told InternetNews.com.

Increasing concern

That report, released in January and also co-funded by Microsoft -- although not by the ITEI -- revealed that at the time, 90 percent of small businesses were planning on maintaining or even adding staff.

But if ITEI's findings are any indication, many small businesses are realizing that they're facing serious difficulties. That puts them in the unenviable position of being less prepared to do battle against competitors as the economy improves.

But for IT vendors -- perhaps not coincidentally, like those involved with ITEI -- it may represent something of an opportunity to help small and midsized businesses (SMBs) trim their expenses.